Today, we will understand some technical terms with
respect to trading. It will be a short blog but very effective. The knowledge
every beginner or enthusiast should have before starting to trade plays a vital
role in future. So, understanding the difficulties faced during start of
everyone’s career I am writing this blog to make sure every minute information gets
easily absorbed by everyone.
So, let’s begin with a
short technical blog.
Trading plays a vital role for every user.
To make it more efficient and fluid, there are certain Order types which helps
users to customize their order as per their requirements.
Just take a look on these Order Types:
LIMIT ORDER
To understand this in a better way,
let’s take an example.
Assume yourself as a Market maker or Trader.
Now, you have a good amount for investment and you are not in rush. You have
patience and can wait longer to get your trade executed. So, this is the best
type of order you can use.
With this order type, you can set a
limit to your bid amount. If you want to sell your bid at $100 only and don’t
want to take risk then you can set a selling bid at $100 and wait for a buyer
to buy it. It may take a longer time to execute but the risk of loss is almost
0.
Similarly, if you want to buy a bid at
your desired amount then you can set it manually and wait for someone to sell
it at that price. Once a seller is ready to sell his bid at the desired amount
of yours, then automatically your trade will get executed. This is called a ‘LIMIT
ORDER’.
MARKET ORDER
Market order are those types of order
which is totally depended on current market prices. Here, you can’t manually
input your amount.
To understand it clearly let’s take a
situation.
Assume that you are in rush. You have
limited time for trading and waiting. Here, you can use market order but you
will suffer a difference in price. If, without analysis and Technical pre-requisite
knowledge you trade, then there are higher chances of incurring a loss. In market
order there is no opportunity to add manual inputs. The price is totally
depended on current market price. Those who are in rush or don’t care for
slight slippage amount then for them it is fine to deal with. A beginner should
never use this Order to place his bids. It might be very risky as well as loss
of asset.
Unlike
Limit and Market Order, there is another type of order which is a little different
from both of the above-mentioned orders.
Let’s welcome it! 😊
STOP-LIMIT ORDERS
The name has 2 modes, i.e. STOP &
LIMIT. Here, stop price triggers the limit order and makes limit order to
be placed in order book. Let’s understand it through an example;
Assume that you have certain type of
cryptocurrency which you had bought at $150. Now, you want to sell it at a higher
profit. So, you use Stop-Limit Order to execute it.
You manually set a Stop price higher
than Market price. In this case, you have asset of $150 and your expectation is
$165. So, you’ll set a STOP price at $155 and a LIMIT price at $165. As the
market rises gradually, it will hit your STOP price first. As soon as it hits
the STOP price, automatically your LIMIT ORDER will get triggered
(Activated). Your limit price is $165. So, till then between STOP and LIMIT
your orders will get filled. Once the Market Price rises above $165 then you
won’t get your orders filled. To understand it more clearly click the image
below and clear your doubts.
I hope these terms are now cleared for
you. The in dept knowledge before trading is very important. So, try to read more
on these topics. In future, there’ll be more related topics for everyone.
If you liked the blog, please share it
with your friends. 😊
Altcoins
blockchain
BLOG
Crypto terms
Cryptocurrency Market
LIMIT
MARKET
Money
ORDER
STOP-LIMIT
Virtual Currencies
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